PPP in Education

Workshop on PPP in Urban and Social Sectors

Manish Aggarwal, Director Consulting &

Brijgopal Ladda, Head PPP

CRISIL Risk and Infrastructure Solutions Limited

21st May 2010

 Key Messages

Historically, Education sector has witnessed low public spending

Highly regulated with multitude of agencies

Recent Government Initiatives would completely transform

Education sector landscape

Planning Commission recognizes criticality of private investments

through PPPs to plug in large deficits

PPPs in Education needs to recognize unique characteristics

Understanding the value chain in Education would help develop

appropriate models

Formulation of clear policy, regulatory framework, monitoring

service delivery, and design of annuity scheme critical

2.
 Historically, Education sector has witnessed low public spending
Budgetary Allocations have not increased
in percentage terms
The budgetary allocation for Education is currently
at ~ 3.8% of GDP (target of 6%)
The allocation for Higher Education accounts for
12% of total

Leading to large deficits across the value

chain
Gross Enrolment Ratio (GER) for upper primary
level is at 70%
GER for Higher Education at 12% (target 15% by
2015)
Estimates suggest need for 1500 universities
against 400 at present
Availability of professional colleges in rural areas
non commensurate with the total rural population
Significant regional disparities

Offers immense investment opportunities.

3.
 Policy and Regulatory environment highly regulated

Multitude of regulations that govern education sector at both

centre and state level

Fragmented with involvement of multiple agencies

Universities Grants Commission- Higher Education & Research
AICTE, MCI, DCI- Technical, Medical & Dental
Bar Council of India- Legal
Distance Education Council

Private investment in education only as not-for-profit and can

be structured through Trust/Societies/company under section 25

4.
 Recent Government Initiatives have potential to completely transform
Education sector landscape

Elementary education received a major thrust post the launch of Sarva Shiksha
Abhiyan Programme during the Xth plan

Introduction of Mid- Day Meal Programme led to increase in the GER, and
retention along with improving the nutritional status

Enactment of Right to Free and Compulsory Education- a path breaking

milestone

Policy proposals in pipeline:

National Council for Higher Education and Research- to address multiplicity of regulatory
agencies
National Accreditation & Regulatory Authority- to maintain pan India global standards
Three other important bills tabled in Parliament to address entry & operations of foreign
educational institutions; prohibition of unfair practices; and educational tribunals bill

5.
 Planning Commission recognizes criticality of private investments
to meet plan targets
Private investment imperative to expand infrastructure and provide
greater access to all forms of education in India
PPPs a good way to attract private investments
Concept of PPP & its applicability to education not new; requirement is
to accelerate the pace and develop new models of participation

PPPs
PPPs would
would improve
improve

Infrastructure
Infrastructure Access
Access Transparency
Transparency Funding
Funding Relevance
Relevance

For
For rural
rural Impart
Impart right
right
Availability
Availability of
of population
population & & By
By making
making cost
cost Through
Through easing
easing skills
skills in line
in line
schools & allied
schools & allied marginalized
marginalized of service more
of service more of budgetary
of budgetary with changing
with changing
infrastructure
infrastructure citizens
citizens ofof the
the visible
visible constraints
constraints demands
demands ``
society
society

However, Private participation needs to be regulated to ensure non-negotiable quality and affordability
in line with socio-economic objectives
6.
 PPPs in Education needs to recognize following key characteristics
of this sector
Core education services is not-for-profit. However, infrastructure and other
support services can be. Need to understand value chain

Regulation & strict adherence to quality of service delivery absolutely critical for
success of PPPs

Local involvement to generate trust important to create buy-in

Clear policy framework, institutional arrangement for creating awareness /

capacity building, and common guiding principles necessary for ensuring private
participation, and large pipeline of projects

Sector (key sub-segments) may require both capital and operational subsidies;
Annuity structure may be critical for ushering in large scale PPPs

Need to have alternate revenue streams - Multiple use of infrastructure - night

schools, vocational training, corporate training centres etc
7.
 Understanding the value chain in Education would help develop appropriate models

Infrastructure
Infrastructure facilities
facilities Operational
Operational Services
Services Allied
Allied Services
Services

1.
1. Provision
ProvisionofofBooks
Books
1.
1. Management
Managementof ofProfessional
Professional 1.
1. Operations
Operations --O
O &&M
M 2.
2. Transport,
Transport,Catering
Catering
services-
services-development
developmentofof 2.
2. Provision
Provisionof
ofFaculty
Faculty 3.
3. Library
Library
building/infrastructure
building/infrastructure 3.
3. Training
Trainingand
anddevelopment
development 4.
4. Labs,
Labs, IT,
IT,Administration
Administration
Sports
Sports

Bundled
Bundled Approach
Approach for
for development
development of
of New
New institutions
institutions

Basis for structuring the PPP models

Gap and Objective
Social and Legal Aspects

Infrastructure and allied services can be easily taken up by any infrastructure

developer / player with a profit objective
Operational services needs to align with not-for-profit objective of government
Annuity payments may offer a good solution keeping in view the government
objectives and affordability issues
Alternate revenue streams may reduce need for operational subsidies
8.
 PPP Models in Education Sector (illustrative only)

Service Definition Contract Type

Infrastructure (input) Government buys services Management or professional

services

Operational Services Government buys operation Operational contract

(process) services of schools (Grant in aid)

Education Services (output) Government buys seats Contract for education of

in private schools specific students

Facility Availability (input) Government buys facility Infrastructure services

availability- sports, IT, Labs contract

Facilities and Services Government buys facility Infrastructure contract and

(bundle) availability and services services contract

Source: PPP in Education (Dr Sam Carlson)

9.
 Key suggestions for stimulating private investments in
Education

Formulate clear policy to promote PPPs in Education

Creation of institutional and regulatory mechanism including

establishment of accreditation agencies

Develop appropriate models to attract private investments keeping in

view the government objectives and value chain

Draft Model Contract documents or atleast key principles document,

which can be used by state agencies to develop project pipeline

Launch pilot projects to test models

10.
Thank You
 www.crisil.com

maggarwal@crisil.com
bladda@crisil.com
12.